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Wednesday, August 03, 2016

This week, the two largest pharmacy benefit managers (PBMs)—Express Scripts and the CVS/caremark business of CVS Health—released their 2017 formulary exclusion lists. They are available below for your downloading pleasure.

For 2017, Express Scripts made relatively few changes to its list, which has fewer products than it 2016 list. CVS Health, however, expended its list to 154 products, compared with 124 products last year. CVS also got much more aggressive with specialty drugs.

Read on for my head-to-head comparison, including comments on such high-profile specialty categories as hepatitis C, inflammatory conditions, biosimilars, and more.THE LISTS

Formulary exclusions block access to specific products. They emerged as a powerful tool for PBMs to gain additional negotiating leverage against manufacturers. PBMs force manufacturers of therapeutically comparable brand-name drugs to offer bigger rebates to avoid being cut from the formulary. I believe that exclusions are one of the factors behind growing gross-to-net disparities for manufacturers of brand-name drugs. See Key Insights on Drug Prices and Manufacturer Rebates from the New 2015 IMS Report.

Note that the restrictions affect a PBM’s recommended national formulary. These are suggestions, not mandates. Plan sponsors—the PBM's clients—that do not adopt the standard formulary face reduced rebates and/or higher plan costs. Thus, a drug’s appearance on an exclusion list does not guarantee that all patients will lose access. For more on exclusions, see Section 5.3.2. of our 2016 Economic Report on Retail, Mail, and Specialty Pharmacies.

OBSERVATIONS

1) The PBM exclusion lists continue to diverge.

The chart below shows the number of drugs that have been excluded annually. There are 85 products on Express Scripts’ 2017 formulary exclusion list, compared with 87 on its 2016 list and 66 on its 2015 list. (Note that these are ESI’s reported product counts, so they differ slightly from previous figures.) CVS Health’s new 2017 list has 154 products, compared with 124 products on its 2016 list.

CVS made one interesting change. Last year’s exclusion list was sourced to “CVS/caremark.” But this year, the list emphasizes “CVS Health” and only mentions the name of its PBM in one footnote.

2) Hepatitis C drama continues.

Express Scripts now has two preferred agents in the HCV class: Viekira Pak (genotype 1) and Technivie (genotype 4). Its 2016 list excluded both Harvoni and Sovaldi, while only Sovaldi is excluded on the 2017 list. This means that Harvoni is now officially on its national formulary, but not preferred. Express Scripts also excluded Merck’s Zepatier, which was launched with a lower Wholesale Acquisition Cost compared with competing therapies.

Meanwhile, CVS remains aligned with Gilead Sciences’ Sovaldi and Harvoni products. CVS expanded hepatitis C exclusions to Daklinza, Olysio, Technivie, and Viekira Pak. The latter two products are not excluded from Express Scripts’ list. CVS also announced that it will apply an “indication-based strategy to further contain hepatitis C costs.” No further details were provided on these plans.

3) CVS embraces biosimilars.

Most notably, CVS excluded Sanofi’s top-selling Lantus product, which faces competition from Lilly’s follow-on biologic Basaglar in December. (Click here to read the back story on these products.) Basaglar looks likely to be one of the first major follow on biologics launches under the pharmacy benefit. (Confusingly, Basaglar is not a biosimilar in the U.S., but is considered a biosimilar in the EU.)

CVS also excluded Neupogen in favor of Zarxio, its biosimilar. Note that both products are typically reimbursed under the medical (not pharmacy) benefit.

4) For specialty drugs, CVS is much more aggressive than Express Scripts.

Express Scripts selectively added specialty drugs to its exclusion lists. This year, it made changes to the high-profile and crowded inflammatory conditions category. In 2015, treatments for inflammatory conditions accounted for 26% of specialty spending, according to the Express Scripts 2015 Drug Trend Report.

Express Scripts’ preferred list for inflammatory conditions includes multiple carryovers from last year’s list: Cosentyx, Enbrel, Humira, Simponi, and Stelara. Pfizer’s Xeljanz is a notable addition to the 2017 preferred formulary list. For the past three years, this product has been on Express Scripts exclusion list. Remicade and Otezla are also newly added preferred options. However, Express Scripts excluded the just-launched Taltz, from Lilly.

For oncology, CVS excluded Gleevec. This is unsurprising, since Gleevec now has a generic competitor. CVS also excluded Medivation’s Xtandi (oncology) and Novartis’s Tobi (cystic fibrosis). CVS even excluded two orphan drugs: Opsumit and Helixate FS.

Surprisingly, Express Scripts once again stayed away from the multiple sclerosis category, which was 15.6% of specialty spend. Copaxone is the most widely used product in this class. As I note in How Teva Defended Copaxone From Generic Competition, Teva has been defending market share against Sandoz’s Glatopa, a generic version of Copaxone 20 mg. CVS, however, retained the exclusions it had last year: Avonex, Extavia, and Plegridy.

Back in February, Express Scripts bragged that it would give “extra scrutiny” to Valeant prescriptions. Despite the saber rattling, neither PBM added many Valeant products. Consider Valeant’s Glumetza, which appears on Express Scripts’s 2017 list but was actually announced in January. As I noted at the time, this was a largely symbolic move, because a generic version of the product has already launched. Express Scripts also removed Valeant’s Zyclara. CVS Health's hyperinflationary warning (described below) appears to be clearly targeted at Valeant.

Other controversial products, such as Horizon’s Duexis, are carryovers from Express Scripts’ previous lists. CVS, however, added Duexis back to its formulary. That was surprising.

Can we conclude that Valeant and Horizon have learned to play the game and contract nicely with the PBMs? If so, third-party coverage would help Valeant stop losing money on its Walgreens deal. Horizon even issued an 8-K filing to comfort investors, stating that it "continues to have discussions with Express Scripts and sees a potential pathway, while not guaranteed, to completion of a potential partnership with Express Scripts beginning in 2017." Very intriguing.

6) The 2017 lists are not final.

Both PBMs signaled that the 2017 lists will continue to evolve.

For two therapeutic classes and one product, Express Scripts gave itself flexibility to alter this list. Here are its verbatim comments:

Hepatitis C: “This category is being reviewed based upon recent product launches.”

Insulins: “The Basal Insulins category may be reassessed later this year to reflect anticipated product launches.”

Actemra (Inflammatory condition): “This product may be reassessed later this year to reflect anticipated product launches.”

CVS was more threatening, stating: “On a quarterly basis, products with egregious cost inflation that have readily-available, clinically appropriate and more cost-effective alternatives may be evaluated and potentially removed from the formulary.” You have been warned.

7) How much is this really worth?

We can’t assess the true economic impact of exclusion lists. By dropping products to gain negotiating leverage, PBMs reap significant marketing advantages with their plan sponsor clients. The PBMs can claim to be standing up to pharma on behalf of payers, regardless of the actual dollar or patient impact.

For 2017, Express Scripts asserts that exclusions will save plan sponsors $1.8 billion, compared with $1.3 billion last year. CVS claims that it will generate “a total savings of more than $9 billion for clients from 2012 to 2017.” There are no independent data verifying these savings.

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What do you think? Please feel free add your own observations on the new 2017 lists in the comments below.

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